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In accordance with a choice-of-law provision in the underlying contract, the New Mexico Court of Appeals applied Texas law in rejecting the argument that the unavailability of class-wide relief rendered an arbitration agreement unconscionable. As the Court noted, the Texas courts have previously determined that the procedural right to seek class-wide relief cannot supersede the substantive right to contract for arbitration.
In Fiser v. Dell Computer Corp., No. 25,862, 2007 WL 2197515 (N.M. Ct. App. Apr. 30, 2007), Fiser bought a Dell computer over the Internet. Several months after delivery of the computer, Fiser filed a class action lawsuit against Dell, alleging that the computer contained less memory than advertised.
Dell moved to compel arbitration pursuant to the terms and conditions of the sale. In opposing the motion, Fiser argued that he never agreed to arbitrate and that even if he had, the arbitration agreement was unconscionable and therefore unenforceable. The trial court granted the motion to compel arbitration.
On appeal, the Court first addressed whether Fiser ever agreed to arbitrate. The terms and conditions were presented to Fiser in at least three instances. First, during the online purchase, there was a hyperlink entitled “Terms and Conditions of Sale.” Second, after the online purchase, Dell sent a confirmation email with another hyperlink to the terms and conditions. Third, when the computer was delivered, the box contained a hard copy of the terms and conditions.
The Court found that Fiser assented to the terms and conditions of sale by keeping the computer when the box contained a hard copy of the terms and conditions advising him that acceptance of delivery constituted assent. As the Court explained, “[s]uch ‘approve-or-return contracts’ are enforceable in almost all jurisdictions that have considered the issue.” Given this finding, it was unnecessary for the Court to determine whether the hyperlinks were sufficient to constitute notice and assent.
Having determined that Fiser assented to the terms and conditions of sale – including the arbitration agreement and Texas choice-of-law provision – the Court turned to Fiser’s unconscionability argument. The Court found that there was no procedural unconscionability, under Texas or New Mexico law, because Fiser had marketplace alternatives to buying a Dell computer.
Fiser argued that the arbitration agreement was substantively unconscionable because it required the buyer to arbitrate claims against Dell but did not require Dell to arbitrate any claims against the buyer. The Court rejected this argument because Texas law “does not require that parties to an arbitration agreement be equally bound with respect to the arbitration agreement as long as the parties ‘have provided each other with consideration beyond the promise to arbitrate.’”
Alternatively, Fiser argued that the arbitration agreement was substantively unconscionable because the underlying rules of arbitration – specifically, the National Arbitration Forum Code of Procedure – “do not allow claims to proceed as class actions.” The Court rejected this argument because Texas courts have previously determined that the procedural right to seek class-wide relief cannot supersede the substantive right, under the Federal Arbitration Act, to contract for arbitration. See AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 200 (Tex. App. 2003).
Finally, the Court found that the application of Texas law did not violate any public policy of New Mexico given New Mexico’s high threshold for unconscionability and its “clear preference for enforcing arbitration agreements.”
The Texas decision cited by the Court relied on Southwestern Refining Co. v. Bernal, 22 S.W.3d 425 (Tex. 2000) for the principle that the right to seek class-wide relief is merely procedural. In that case, the Texas Supreme Court explained that “[t]he class action is a procedural device intended to advance judicial economy by trying claims together that lend themselves to collective treatment.” Id. at 437.
In cases addressing the enforceability of class action waivers, courts routinely overlook the fact that the promotion of judicial economy is both (1) a principal purpose of the class action device and (2) a natural consequence of arbitration.
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